Cutting the cost of road
maintenance and improving road conditions are the main reasons why several
Latin American countries have started to look for new ways of contracting
out road maintenance. With technical assistance from the International
Road Federation and German Aid, Colombia, Brazil, Guatemala, Peru and Uruguay
have initiated so called Performance Specified Road Maintenance Contracts
on a pilot basis. In addition, Argentina and Chile have let several such
contracts recently. In this scheme the Road Authority serves as the owner,
but out-sources both the management and production of the maintenance work
to a single contractor. Most of these contracts have been operating for
more than a year and cover routine maintenance and, in some cases, periodic
maintenance and road rehabilitation as well. Extension of the road network,
road surfaces and conditions, and the time period vary in each pilot project
and will provide a wide basis for evaluation and improvements.

This article provides an
overview of the different pilot projects, giving special attention to the
performance specifications and control procedures, how these contracts
have been implemented, and what lessons can be learned so far.

1.
Introduction

Cutting the cost of road
maintenance and improving road conditions are the main reasons why several
Latin American countries have started to look for new ways of contracting
out road maintenance. With technical assistance from the International
Road Federation and German Aid, Brazil, Colombia, Guatemala, Peru and Uruguay
have initiated so-called Performance Specified Road Maintenance Contracts
on a pilot basis. In addition, Chile and Argentina have let several such
contracts recently. Most of these contracts have been operating for more
than a year and cover routine maintenance and, in some cases, periodic
maintenance and road rehabilitation as well. Extension of the road network,
road surfaces and conditions, and the time period vary in each pilot project
and will provide a wide basis for evaluation and improvements (see Figure
1).

The experiences of the
road rehabilitation and maintenance concessions let in Argentina in 1990
were used in the design of these projects. In addition, several developed
countries such as Australia and, most recently, the United States of America
and New Zealand[1]
have started to contract out road maintenance based on performance specifications.

2.
Performance Specified Road Maintenance Contracts

What is a Performance Specified
Road Maintenance Contract? The traditional way of contracting road maintenance
is based on a schedule of unit prices and estimates of quantities. The
works to be performed are specified in the contract and payments are based
on executed measured works. By contrast, a Performance Specified Road Maintenance
Contract defines the minimum conditions of road, bridge, and traffic assets
that have to be met by the contractor. Payments are based on how well the
contractor manages to comply with the performance standards defined in
the contract, and not on the amount of works executed. The nature of the
contract allocates responsibility for work selection, design and delivery
solely to the contractor. Hence, the choice and application of technology
and the pursuit of innovation in materials, processes and management is
all up to the contractor. This allocates higher risk to the contractor
compared to the traditional contract arrangement, but on the other hand
may increase the contractor's margin where improved efficiency and effectiveness
of technology, process, design or management reduces the cost of achieving
the specified standards.

To define these standards
is rather a challenging task. The aim is to minimize total systems cost,
including the long-term cost of preserving the roads as well as the cost
to the road user. To avoid ambiguity, performance standards have to be
clearly defined and objectively measurable.

Typical performance standards
are:

·The
International Roughness Index (IRI) to measure the roughness of the road
surface, which affects vehicle operating cost;

·The
absence of potholes and the control of cracks and rutting;

·The
minimum amount of friction between tires and the road surface for safety
reasons;

·The
maximum amount of siltation or other obstruction of the drainage system;

·The
retroreflexivity of road signs and markings, and

·The
control of vegetation close to the roadway to a specific height.

Examples of performance
standards applied in different contracts are compiled in Figure 2.

Figure
2.: Examples of performance standards applied in different contracts

Asset Class

Component

Performance Standard

Pavement

Potholes

Roughness (asphalt)

Roughness (bituminous)
treatment)

Rutting

Cracks

No potholes

IRI
< 2.0 (Argentina), IRI < 2.8 (Uruguay)

IRI
< 2.9 (Argentina), IRI < 3.4 (Uruguay)

< 12mm (Argentina),
< 10mm (Uruguay, Chile)

Sealed

Gravel surfaces

Potholes

Roughness

Thickness of gravel
layer

No
potholes

IRI
< 6 (Uruguay), IRI < 11 (Chile)

10 cm (Chile, Uruguay)

Shoulders

Potholes

Cracks

Joints with pavement

No potholes

Sealed

Vertical alignment
< 1cm (Chile, Uruguay), sealed (Peru)

Drainage system

Obstructions

Structures

No obstructions.
Should allow for unhindered flow of water (Chile, Uruguay)

Without damages and
deformations (Chile, Peru)

Road signs
and markings

Road signs

Road markings

Retroreflexivity of
road markings

Complete and clean
(Argentina, Chile, Peru)

Complete and visible
(Argentina, Chile, Peru)

160 mcd/lx/sqm. (Argentina)

70 mcd/lx/sqm. (Uruguay)

Right of way

Vegetation

Foreign elements

< 15cm height
(Argentina, Uruguay)

No foreign elements
allowed

As traffic conditions vary
from road section to road section, different sets of parameters will create
minimal system cost, taking into account road maintenance and vehicle operating
costs. The application of the Highway Design Model (HDM) can be helpful
to define some of these parameters, such as the IRI.

If
sections of the road in question are in poor condition, the contract should
include the rehabilitation of these sections as well. In this case rehabilitation
works may be carried out in the "traditional" form, with official design
and paid on the basis of unit prices as in the cases of Chile, Colombia
and Uruguay. Or alternatively, final design of rehabilitation works can
be left to the contractor and payment for these works can be included in
the lump sum contract price. Argentina has taken this approach whereby
55% of the lump sum is being paid in three installments during the first
year (rehabilitation period) and 45% in 48 equal monthly installments in
the years two to five of the five year contract period. To include initial
rehabilitation works in the performance specified road maintenance contracts
as well provides two main advantages: first, it gives the contractor incentives
to perform well on the rehabilitation works to avoid premature repairs
which would increase maintenance cost, and second, it insures that maintenance
will start immediately after the rehabilitation works have been finished.

In addition, performance
standards may include other obligations, i.e. supplying direct services
to the road user such as roadside telephone, ambulance and towing, as for
example in the case of Colombia.

All
of the performance specified road maintenance contracts let so far have
a contract period of between 1 and 5 years. This is to give the road administrations
as well as the contractors the opportunity to gain experience with this
new kind of contract. Of course, long-term contracts with contract periods
of more than 10 years are better suited to capitalize on the potentials
of performance maintenance contracts since the optimization of periodic
versus routine maintenance interventions needs at least a ten-year period
in the case of asphalt concrete roads. Long-term contracts also provide
a better incentive to use new technologies and even to undertake some research
on how to adapt these technologies to the very specific conditions at hand.

3.
Control Procedures and Penalties

How can we make sure that
the contractor complies with the performance standards specified in the
contract? Vital to the success of this new way of contracting road maintenance
is to have appropriate control procedures as well as penalties for non-compliance
well defined in the contract documents. Procedures defined in various contracts,
as well as experiences, vary.

In the case of Argentina
inspectors are inspecting the road and making random checks to verify compliance
at least twice per month. Over time, inspectors become more experienced
and familiar with trouble spots along the roads. Experience underlines
the importance of having a well-documented inventory of the road as well
as daily records of activities undertaken by the contractor. This helps
to understand the specific behavior of the roads and contributes to better
preventive maintenance. Inspectors and personnel of the contractors went
through a valuable phase of learning and adaptation to arrive at an effective
control system. In Argentina a very important role is given to the active
participation and control of the road user. Each toll station is keeping
a complaints and suggestions book and users are encouraged to report incidents
to the Road Administration. Extensive use of this mechanism has helped
to improve road conditions and has revealed an increasing satisfaction
of the road users with the new scheme.

In Chile there are
four kinds of inspections: (i) monthly inspections cover 10% of the roads
under contract. Selection of stretches of 1 km each is based on a random
sample well defined in the contract; (ii) weekly inspections looking at
5% of the roads randomly selected; (iii) non-programmed inspections to
respond to complaints by road users; and (iv) follow-up inspections to
verify that appropriate action has been undertaken by the contractor to
rectify non compliance. Payments to the contractor are based on the results
of the monthly inspections. A percentage of compliance is being calculated
based on a formula using the results of each individual performance standard
as input data. Full payment will only be made on 100% compliance. During
the first two years of the contract, compliance has been around 95%. Penalties
are being applied if the contractor does not rectify established deficiencies
within a certain time limit.

In other countries, such as Colombia and Guatemala,
slightly less sophisticated ways of assessing the compliance with performance
standards are being followed.

In order to enable the
contractor to manage the contract properly and the road administration
to monitor it, it is vital that the contractor has a proper management
and quality control system in place. The Argentinean, Chilean and Colombian
contracts are especially specific in this respect. Part of the obligations
of the contractor is to keep records of his inspections, quality control
procedures and works undertaken. This is especially important to monitor
and adjust the pilot projects. For example, due to the excellent contract
monitoring system in place in Uruguay, the recently let contracts show
significant improvements over the earlier contracts.

4.
Implementation of Pilot Projects

How can this new contracting
scheme best be implemented? The approach to be taken very much depends
on the specific circumstances of each country. The experiences of the road
administrations with contracting out road maintenance and the competence
of local contractors play major roles. The longer the experience of contracting
out road maintenance, the more comprehensive the scheme to implement pilot
projects based on performance standards can be. If all maintenance is still
being executed by force account, pilot projects should be limited to small-scale
schemes.

A
first step could be to award one or two-year contracts, with performance
standards related to routine maintenance only. A suitable second step could
consist of four to five year contracts that might include more demanding
standards such as the IRI. Embarking on long-term contracts will require
some experience with short-term contracts and very much depends on the
ability of the road administration, as well as the contractors, to assume
the special responsibilities and risk associated with such contracts.

In order to gain experience
Brazil, Chile, Colombia, Peru and Guatemala have started with 1 to 3 pilot
projects with a road network of approximately 300 kilometers each, concentrating
mainly on roads with asphalt concrete and bituminous treated surfaces.
In some cases gravel roads were included as well. Typical contract duration
is 3 to 5 years.

Generally, contracts have
been awarded based on public bidding. Prior to the preparation of bids
extensive discussions took place between the road administration and the
potential contractors. As this is a new contracting scheme, all parties
involved went through a learning and adaptation process to come up with
the final contract documents. In addition, extensive consultation with
other road administrations already experienced in setting up pilot projects
in their countries has helped to speed up the process of preparing the
necessary documentation.

In Guatemala and Uruguay
the road administrations have successfully encouraged some of their staff
to form small road maintenance enterprises and to maintain roads under
the new contracting scheme. This has helped the road administrations to
reduce excessive staff as well as to gain experience with contracting out
road maintenance by performance standards.

Example of a small-scale road maintenance enterprise in Guatemala
working under the performance specified road maintenance scheme.

5.
Lessons Learned

Fortunately, most of the
pilot schemes have been highly successful so far, with the exception of
a few smaller contracts in Guatemala which have not been prepared properly.
In all other cases, road conditions in the pilot areas have improved notably
and maintenance costs have either stayed the same or have been reduced.
Road administrations and contractors express satisfaction with the preliminary
results. Nevertheless, it is far too early to come to final conclusions.

Preliminary conclusions
can be drawn as follow:

·Pilot
schemes for contracting out road maintenance based on performance specifications
should be carefully planned and implemented. The complexity of the
contracts, especially with regard to performance specifications, road surfaces
and contract duration should be based on past experience in contracting
out road maintenance, the ability of the road administration to prepare
and monitor such contracts, and the qualifications of local contractors
to manage these new road maintenance contracts. Wherever there is little
experience with contracting out road maintenance, a gradual approach is
recommended, starting with short-term contracts and simple performance
standards with regard to the control of potholes and cracks and the cleaning
of the drainage system. Whenever roads are not in maintainable conditions,
prior rehabilitation is necessary, either based on unit prices or included
in the fixed monthly payments the contractor receives over the contract
period.

·As
with all new concepts, the road administrations as well as the contractors
have to cooperate very closely to make the scheme work, and some adjustments
may be required during the course of the pilot project. Preliminary
reluctance and concerns expressed by some of the contractors to engage
in the new contract scheme have encouraged road administrations to closely
cooperate with the contractors in the preparation of the contract documents
and have helped both sides to better understand the opportunities and risks
involved. They have also contributed to increasing the number of bids received.

·Substantial
improvement of road conditions and/or reduction of road maintenance costs
cannot be expected immediately. Cost may even prove higher in the beginning
to reflect higher risks taken by the contractor due to the unfamiliar contract
scheme. Proper risk allocation between the road administration and the
contractor, as well as full information on the possible risks involved,
can reduce this problem, as has been successfully proven in Uruguay.

·Wherever
experienced contractors are managing the pilot projects, the new contracting
scheme has resulted in encouraging the introduction of new technologies
in order to reduce maintenance cost. Since all of the contracts have
been let fairly recently and are of short duration, few technological improvements
have been observed so far. But the increasing experience with the new contracting
scheme, the exchange of knowledge between contractors, and the gradual
introduction of long-term contracts will most likely accelerate the application
of new technologies.

·With
less experienced contractors, especially newly formed small-scale road
maintenance enterprises, training in management, financial and technical
issues is essential for the success of the pilot projects. Uruguay,
for example, was most successful in this respect, implementing an ample
training program for small enterprises, which produced excellent results.

·Proper
control and application of sanctions for non-compliance with performance
standards is equally vital for the new scheme to be successful. In
principle, these contracts are far easier to control than traditional contracts.
Supervision of the pilot projects might be contracted out, applying stiff
penalties if controls are not enforced properly. In addition, as long as
performance standards are made public, road users will become the best
"inspectors" and will complain if standards are not being met. Unfortunately,
some of the pilot projects have not been supervised properly in the initial
phase of these projects. The main problems have been the regularity to
control the performance standards as well as certain reluctance in applying
the proper penalties foreseen in the contracts, when performance standards
were not met. This very often reinforced the rather poor performance of
the contractor. In contrast, wherever proper controls have been enforced
and the appropriate penalties have been applied in the case of non-compliance
with the performance standards, contractor performance has improved significantly.

The principal advantage
of contracting out road maintenance based on performance standards is its
potential for reducing road maintenance costs and improving road conditions,
especially in developing countries. Another important advantage of this
new contracting scheme is that the users know exactly the road conditions
they can expect and demand. Unfortunately, improper implementation of this
scheme could backfire and produce adverse effects. It is to be expected
that contracting out road maintenance based on performance standards will
quickly spread all over the world and eventually will replace the traditional
way of contracting out road maintenance based on unit prices.

[1]
For further details visit the world wide web under the address: http://www.zietlow.com